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Tax Planning FAQ

Q.    What is the current inheritance tax nil rate band?

The current nil rate band (the amount of your estate which is taxed at a rate of 0%) is £325,000.

Q.    What rate is inheritance tax paid at?

On death, inheritance tax is paid at 0% on any assets covered by the inheritance tax nil rate band and at 40% on any additional assets (unless they are eligible for special treatment such as spouse exemption, charity exemption or relief if the assets are qualifying business or agricultural assets). Inheritance tax is also levied at a rate of 20% on some lifetime transfers and at any rate up to (but not exceeding) 6% on some trusts.

Q.   Are there any exemptions available against inheritance tax?

Yes, there are many different types of relief or exemption. It is important that specialist advice is taken in each individual case to ascertain whether any of these exemptions or reliefs are available. The main exemptions and reliefs are:

  • Spouse or civil partner exemption
  • Charitable exemption
  • Business and/or agricultural property relief
  • Annual allowance (currently £3,000 per tax year per taxpayer)
  • Small gift exemption (currently £250 per tax year per individual beneficiary)
  • Gifts in consideration of marriage
  • Gifts out of normal expenditure

Q.   What can I do to try and mitigate inheritance tax payable on my estate

What can be done will depend on your circumstances and the type and value of assets that comprise your estate, which is why it is crucial that advice specific to your circumstances is sought. As a general rule though you could consider making outright gifts from your capital, ongoing gifts from any excess income that you have and/or gifts into trust either from capital and/or excess income.

Q.    Whose responsibility is it to submit an income tax return?

The onus is on the individual, executor or trustee in question to account to the Revenue (via an income tax return) for any income received. The Revenue will not necessarily prompt you.

Q.    What is the deadline for filing income tax returns?

Paper returns need to be filed by 31 October in the same calendar year that the tax year in question ends. Internet returns must be filed by the following January. For example, if income is received between 6 April 2013 and 5 April 2014 the paper return must be filed by 31 October 2014 and the internet return by 31 January 2015.

Q.    What is the penalty for late submission of an income tax return?

There is an initial £100 penalty for late submission. If the return is over 3 months late, then there can be an additional penalty of £10 for each day over 3 months, up to a maximum of 90 days. After 6 months there can be an additional penalty of 5% of the tax due or £300 (whichever is greater). The penalties after 12 months late can be even more substantial. Interest will also be charged on unpaid tax.

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